Quote of the Day

"There's much more to the game of stock speculation than to play for fluctuations of a few points. 

It takes a man a long time to learn all the lessons of all his mistakes. They say there are two sides to everything, but there is only one side to the stock market; and it is not the bull side or the bear side, but the right side. It took me longer to get that general principal fixed firmly in my mind than it did most of the more technical phases of the game of stock speculation."

Jesse Livermore 

This Week's Message: Absolutely, There is A Bubble

Yes, there is a bubble out there! How do I know that? Well, think about it; if indeed the economy is as good as even Fed chair Powell suggested yesterday, why on Earth would they even dream of lowering interest rates, and why would they commit to not raising them till they see the whites of inflation's eyes virtually pressing against the ends of their noses, if not the back of its head as it races right past them? There has to be something that has the Fed exceedingly concerned if they feel they have to stimulate an already humming economy.

Quick Fed-Meeting Followup and Bonus Quote of the Day

The market, after a bit of hemming and hawing, traded higher on this "Fed day". You might think it was the quarter-point rate cut that did the trick, but of course we knew that was coming, and the market actually traded lower on the announcement itself. What traders saw as a green light to buy was Powell's comment that there'll be no rate increases until inflation rises "significantly".

Quote of the Day

I agree with Kevin Muir, strategist with East West Investment Management, in a recent Real Vision interview with regard to the real-world efficacy of yet more monetary stimulus (which is on its way a little later today):

Prudence Demands

While I'll no doubt have more to offer by way of commentary on this morning's Q3 GDP report, in a nutshell 1.9% growth is better than the 1.6% economists had forecast, and we can thank ourselves, us consumers, for keeping the economy afloat (although Uncle Sam did pitch in as well):

Quote of the Day

The S&P 500 just dropped 8 pts in a matter of seconds on the following:

Chart of the Day

Consumers are beginning to fret a bit about the future (recessions in grey):

Just another friendly reminder of why we're treading cautiously for now on our clients' behalf.

Remaining Careful, Despite Positive Near-Term Prospects

Here's the close to my latest entry to our internal market log:

"While, again, I see a good chance that stocks trade higher in the near-term, the market faces somewhat of a double-edged-sword setup. Should, as some economists expect, the headline data begin to improve, traders will fret over the Fed becoming therefore less accommodative. Should, on the other hand, the data sour even more rapidly, traders will fret that the Fed is behind the curve and, thus, won’t be able to skirt a near-term recession.

Market Update (video)

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Quote of the Day: Be Very Careful What You Ask For!

As we've been suggesting for months, the efficacy of Fed rate cuts at this juncture, in our candid view, is virtually nil; except for their potential positive impact on asset prices (stocks in particular) and the -- albeit short-lived -- igniting of animal spirits (increased economic activity) that might produce. 

Double-Trouble (potentially) In The Auto Loan Market

There are two troubling aspects to the following snippets from this morning's Bloomberg article titled "Subprime Auto Giant's Loans Souring at Fastest Clip Since 2008".

Headline of the Day

Stocks just caught a nice flurry of buying on the following headline, taking the S&P 500 to within a virtual tick of its all time high:

Today's Log Entry: You'd Think New Highs Right Here

10/24/19 Thursday

Despite the suspect state of general conditions, I’m frankly surprised that the equity market isn’t screaming higher right here. The Fed’s been essentially tamed, earnings are coming in better than (albeit reduced) expectations, a soft Brexit, whenever it happens, is a done deal and all indications are that there’ll be a “phase 1” (fundamentally meaningless, but, then again, fundamentals are not remotely driving the equity market currently) trade deal signed come 11/29.

This Week's Message: Being Responsible -- And Some Additions To My "Charts That Trouble Me" File

Many long-time clients have mentioned to me recently that it's been, well, a long time since they've heard me sound so bearish on the market. While I completely understand where they're coming from -- and while I know the word has left my lips during some client review meetings -- I don't know that "bearish", as in committed to the notion that the market has nowhere to go but down from here, completely captures my current thinking. 

Taking Outsized Risks for Undersized Rewards!

Typically we'd view a low yield spread between high yield (junk) bonds and high quality (investment grade) bonds as a positive sign with regard to present general conditions. Of course context is everything!

Heightened Global Risk - OR - Treading Cautiously Amid The Likelihood Of New Highs

Bloomberg opinion editors just penned a piece titled "The World Economy Is Stumbling Toward Disaster". And while the title is a bit much, I do sympathize with much of what concerns them.

Here are a few snippets, this will sound familiar to regular readers:   emphasis mine...

Quote of the Day

Hold this quote close as you consider the messaging herein of late regarding the under-the-surface pressures we're seeing, particularly in the corporate debt market, and as the equity market meanders its way further into history's longest expansion:

Market Update (video)

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Quote of the Day: More Prudence Justification

As I intimated yesterday, the IMF's latest Global Financial Stability Report is a robust, deep dive into what lies beneath the surface of the world economy. And, alas, as I also suggested, it more than justifies our currently guarded approach to the equity markets.

Quotes of the Day: Justifies Prudence

I'm currently poring over the just-released IMF Global Financial Stability Report, and the deeper I go the more confident I am that hedging our portfolios right here is the definition of prudence.

Chart of the Day: One Really Good Reading, Amid Otherwise Uninspiring Data

On balance, today's data deluge wasn't much to write home about: Mortgage purchase apps were down 4% week-on-week, retail sales missed economists' estimates, business inventories slowed, the Fed's Beige Book (an anecdotal report comprised of inputs from each of the 12 Federal Reserve districts released 2 weeks before each policy meeting) characterized economic activity as "slight to modest", and the Treasury International Capital Report showed foreign investors selling long-term U.S. securities in a big way in August (net -$41.1 billion).

Quote of the Day: This Is A Big Deal Folks!

Clients and regular video blog viewers have heard me say that, in a macro sense, our job here at PWA is to first assess probabilities in terms of the direction of the next 'big' move in financial markets and the economy, and, second, to maintain a firm handle on what lies beneath the surface in order to anticipate the depth and the length of that next big move.

This Week's Message: The Bullish Case For Stocks, How To View It, And Whether We Should Play It...

Listening to Bloomberg Asia last evening I caught a segment where Bloomberg’s reporter, after referencing the IMFs latest downgrade of global growth (they estimate that “90% of the world will experience a growth slowdown this year”) and the Brookings Institute characterizing present global general conditions as a “synchronized stagnation”, accurately listed the plethora of global headwinds that he suggests virtually have to “entrench a period of gloom”.

Newsflash of the Day

While finishing this week's message (coming to you earlier this week) I noted the trading action that occurs on headlines and tweets. While typing, lo and behold, I noticed the S&P 500 (which was trading notably lower on the morning) shooting higher on the one-minute chart.

Quote of the Day

Not to continue to sound so dang gloomy amid a bull market that is now threatening new highs, but it's the kind of stuff referenced below bubbling under the surface, along with an on-balance waning macro backdrop, that is so dang troubling!

Market Commentary (video)

I do more talking than charting in this morning's video; touching on Brexit, China, corporate earnings, corporate debt and -- from the 6:18 point forward -- our thinking with regard to client portfolios heading into next year.


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Chart of the Day: Freight Data Not Good!

Cass Information Systems highly-touted (as a leading economic indicator) freight index report was just released for September. 

Here's why it's so "highly-touted":

Quotes of the Day: "A Cacophony Of Noise"

In Friday's post I suggested that nothing consequential occurred last week with regard to trade negotiations with China. In their morning message Bespoke Investment Group pretty well spells it out: 

"Together, We Can Make This World A Beautiful World"

Our message this week will not brighten your day, but something occurred this morning that will:

This Week's Message: The Problem With The Central-Banks-Can-Save-The-Day-Narrative...

This week's message is an excerpt from my latest entry to our firm's internal market log, followed by the contents of a file I created a mere two weeks ago titled "Charts That Trouble Me".

Market Update (video)

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Bonus Quote of the Day

The following, from Greenspan’s 2014 book, speaks (screams) to what we’re presently experiencing!

Quote of the Day: Looking past the end of traders' noses...

This, from Evercore's head of China research, is essentially what the market's rallying on this morning:

Pre-Market Update (video)

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Chart of the Day

The market's in rally mode this morning on news that China, despite the hits it's taken this week from the U.S. (blacklisted companies, restricted visas and threat of capital controls), is coming tomorrow with a "limited" offer on trade.

Pre-Market Update (video)

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Equity Market Update (video)

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Yeah, but...

Last Friday I penned a quick note titled "Wow!! But...", and poured two glasses of cold water on the day's big rally.

Specifically: 1) the fact that bonds rallied hard as well, and 2) that, for stocks, it occurred on notably below-average volume.

Well, today, after trading higher for better than half the session, the S&P gave up the ghost and closed about 20 points off of its intraday high. While a roughly .7% decline isn't huge (it's the equivalent of about 185 Dow points), it's still nonetheless notable -- just not enough to put Wow!! in today's title.

As for its importance, well, frankly, there wasn't any. For today's late-day selloff to be meaningful, in terms of signaling something pernicious in the immediate underlying conditions, you'd need to see bonds rally; as frightened money would've flown to safety. Didn't happen (didn't happen in safe-haven gold either, by the way).

Here I added today to the chart I showed last time (bonds green, stocks white):


Bonds and stocks now moving together for three days running. 

Today's explanation? Well, if I hadn't seen any news I'd say the most likely excuse would be that a voting Fed member must've said that the economy's good and that they can go easy on rate cuts, or maybe a good data point or two was reported (i.e., in both cases, it would mean good news is bad news [and the Fed's gonna get busy], which is clearly what explained the rally last Thursday and Friday), but we didn't get either. So who knows? Maybe it was indeed simply meaningless action.

Well, just like last Friday, that's the message today's volume action sent. I.e., volume today was, once again, notably below average (suggesting that today was more about reluctant buyers than it was raging sellers):


Stay tuned... much more to come this week -- and it's indeed likely to turn out to be at least near-term meaningful: Fed chair Powell gives a speech tomorrow, and China's trade negotiators will be in Washington Thursday and Friday... 

Quote of the Day

Bloomberg's macro model agrees with ours:

"Sell-side equity analysts’ 7.7% estimated earnings growth for the coming 12 months is way more bullish than the Bloomberg Intelligence macroeconomic model suggests it ought to be."

Quote of the Week: Chilling!

Amid optimism over next week's scheduled U.S./China trade talks, prospects for a more accommodative Fed, the impeachment noise, and a crazy volatile week for stocks, the following didn't receive nearly enough fanfare in my opinion. And, for me, frankly -- given the now-obvious (although we've been warning about this since early '18) nature of what has the U.S. economy threatening to catch down to much of the rest of the world -- is probably the most chilling of recent developments:

Wow!! But....

Wow! Really strong day today! But, while I hate playing the party pooper, well... there are a couple of buts.

This Week's Message: Our Base Case Remains Bearish (next big move), But Near-Term New Highs Are A Distinct Possibility

This week’s data was consistent with my current assessment of general conditions; an overall deteriorating macro setup, although not to the point where we can make the recession call – at least not in the U.S..

Today’s September jobs report came in below expectations and punctuated the overall slowing economic backdrop, but it could’ve definitely been worse.

Charts of the Day

Per this morning's video commentary, I was looking for a pop today. But I gotta tell ya, the fast-diminishing of today's rally I was seeing about 10 minutes before the close made a lot of sense to me. I mean what short-term trader would want to go long into tomorrow's before-the-open jobs report when the supporting data of late say it may not be good??

Market Update (video)

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A Silver Lining Maybe?

As you've noticed, I'm not presently constructive on stocks, but I'm forever open minded.

This Also Has Our Attention!

Here's my brief commentary from September 12th:

Quotes of the Day: This Has Our Attention!

Brief Market Update (video)

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It's Not Just Us!

A famous person complained this morning that the dismal outlook for U.S. manufacturing expressed in today's ISM report was all about the Fed allowing the dollar to rise to the point where "our manufacturers are being negatively affected".

Closer To The Point Of No Return

Oppenheimer Chief Strategist John Stoltzfus, on Bloomberg discussing this morning's disappointing (to put it mildly) release of the Institute for Supply Management (ISM) September Manufacturing Survey, says it's all about the trade war: